'Make-or-break' year for NHS

More must be done to tackle the estimated £25bn waste in the NHS each year, says a new report which predicts the next 12 months will be critical.

Without action the NHS bill will spiral out of control, reaching a deficit of more than £8bn by 2010.

The study by the right-wing think tank Reform argues for deficits to be written off and calls for the NHS to accelerate the introduction of patient choice and competition.

NHS trusts recorded a total deficit of £500 million last year, but the government has pledged it will reach financial balance at the end of this year despite growing evidence the debts will continue.

The report, NHS reform: the empire strikes back, said government efforts to reform the NHS, introduce choice and competition and reconfigure services had been hampered by delays and confusion. The NHS has also failed to control spending on manpower and construction of new buildings.

While ministers defended their record, the report said there was evidence that the reforms are being used to cut debts, not improve services, with non-urgent operations being delayed and increased rationing in services like fertility.

And the reconfiguration of services, which is key to the success of reforms, has been driven by deficits and condemned by protestors.

The authors argue in favour of writing off the deficit, instead introducing tough new measures to ensure better financial discipline. They also call for more patient choice and competition to drive the reforms faster over the next 12 months to safeguard the billions of extra funding given over the past decade.

The NHS receives an extra £35bn each year compared to 10 years ago, but the report said only around £10bn of it is being spent effectively.

And it will get worse. The report predicts the NHS spending will continue to outstrip revenue with a deficit of £8.3bn by 2010/11.

The Department of Health said there were no plans to clear the debts, and reiterated their pledge that the NHS would be in overall balance by the end of the current financial year, and would deliver a surplus by the end of 2007-08.